Analysts optimist on Tata Tech IPO

Most of the analysts have recommended “Subscribe” to the issue, citing its deep expertise in the automotive industry, well-recognised brand with experienced promoters, as well as healthy financial performance.

Meanwhile, there are some areas of concerns, like any other business, such as dependence on a few top clients and third-party vendors, exposure to exchange rate fluctuations, and competitive industry. The company’s revenues are highly dependent on clients concentrated in the automotive segment. Also, it derives a major portion of its revenues from its top 5 clients, including Tata Motors and its British subsidiary Jaguar Land Rover (JLR).

“The long-awaited IPO from the Tata Group, and its name itself signifies trust among investors. The company has deep expertise in the automotive industry and differentiated capabilities to deal with emerging trends. It is a well-recognised brand with experienced promoters. Also, it has showcased strong financial growth in its past performance,” Swastika Investmart says in its report.

Reliance Securities has recommend ‘Subscribe’ to the issue, taking comfort from its healthy business prospects, strong parentage, superior financials with improvement in margins and ratios provides a valuation comfort. As a subsidiary of Tata Motors, they benefit from long-term relationships with both TML and JLR which strengthens to tap the large opportunity in automotive ER&D markets, adjacent verticals to tap the wide business network, it says in a report.

SBI Securities in its report says that Tata Technologies is well placed to encash on the growth opportunities in ER&D space and looking at the relatively cheaper valuations. “At the upper price band of ₹500, Tata Technologies is trading at 32.5x FY23 P/E multiple. Its peers are trading at a relatively expensive valuation with FY23 P/E multiple of 108.9x for KPIT, 68.5x for Tata Elxsi and 40.1x for LTTS,” it says.

Analysts at Sharekhan say that the Tata Group is coming out with an IPO after a gap of almost two decades and the issue seems reasonably priced versus peers and offers a favourable risk reward for the investors. “Tata Technologies future outlook is promising given its proven track-record, established capabilities in ER&D services and focus on adjacencies of Aerospace & TCHM (transport and construction heavy machinery),” it says.

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